Comparisons of carbon, water and nitrogen relations in 33-year-old trees were made among evergreen spruce (Picea abies L.) and three deciduous larch species (Larix decidua Mill., L. leptolepis Gord. and their hybrid L. dec. x lep.), in a field experiment near Bayreuth (West Germany). Nitrogen content per unit dry weight was higher in larch needles than in spruce needles as was the photosynthetic capacity per unit of needle dry weight and area. Area related water demand of the deciduous needles was higher at the needle and crown level than in spruce, whereas evergreen spruce needles displayed a higher water use efficiency. However, because of foliage longevity and thus lower carbon investment in current-year foliage, spruce trees achieved the same stem increment as larch trees of similar age and height. A simulation illustrates that evergreen trees are able to achieve annual carbon gains comparable to deciduous trees because deciduous trees have a higher water demand and nitrogen investment in the current-year needles compared with evergreen trees that depend on longevity of functioning needles.